by Nika Gamtsemlidze on October 23, 2020

ASIC Announces Restrictions On Selling CFDs to Retail Clients

The main regulatory agency of Australia, the Australian Securities and Investments Commission has recently published a statement saying that the regulatory agency has decided to adopt more restrictions on selling the contracts for differences, better known as CFDs in the trading world. This decision means that retail clients in Australia will no longer be able to trade CFDs. The main reason for this restriction is that the regulatory agency is concerned about the procession of retail clients in Australia.

ASIC is known to be one of those FX regulators that are constantly working on ensuring the safety of the traders on the market. For many years, however, the regulatory body was regarded to be not that strict, especially compared to other agencies around the world. The team behind ASIC has always said that they have been working on new guidelines that would make trading with FX brokers regulated by ASIC a lot safer and more secure experience. This new statement made by the regulatory body is another sign that they are working on making the market a lot safer than it is today.

The decision that was made by the Australian Securities and Investment Commission also states that the brokers will have to adopt negative balance protection. This advancement is very important for FX traders, especially for those who are trading Forex with high leverage. Thanks to the negative balance protections, FX brokers will not Abe able to lose more money than they have on their trading account, it will help the local market a lot, by ensuring to avoid the repeat of the debacle which followed the collapse of the Swiss Franc in 2015.

These new regulations that were announced by ASIC follow the trend that can be seen in Europe. Just like European FX regulators, now, ASIC is also restricting FX brokers from offering bonuses and promotions to investors on the market. As the regulatory agency has said, this is done to make sure that investors avoid overtrading. The restrictions will apply to both, monetary or non-monetary cases, and as a result, FX traders will not be encouraged to overtrade anymore, something that can be seen on the market for several years now.

Restriction on Leverage

Something that made ASIC very different from other regulatory bodies on the market was the fact that it allowed investors to trade with very high leverage. Now, as it was announced by the regulatory body, this will be changed. Again, as can be seen, the regulatory agency of Australia is following the same trend that can be seen in Europe.

According to the decision made by ASIC, the Forex brokers in the country will now be limited to offer high leverage to investors. The FX brokers that are regulated by ASIC will have to lower the leverage significantly. For major currencies, as it was announced by ASIC, the limit for leverage will be 1:30, for non-major currency pairs, gold, and major indices, the limit will be 1:20. As for commodities (other than gold) and non-major indices, the limit for leverage will be 1:10, for individual equities, the leverage will be a maximum of 1:5, and for cryptocurrencies, ASIC says that the leverage will be no more than 1:2.

ASIC has been talking about possible changes in the guidelines that they had for a very long time now. Just last year, the company noted that they were working to come up with new intervention measures regarding the binary options and CFDs. Recently, ASIC gave the power to intervene in the job that a certain company does if it believes that it is causing significant consumer damage. This power will ensure that ASIC is creating a safe and secure market for investors on the market.

As the ASIC has announced, it has decided to put a ban on the binary options completely in addition to other decisions that were announced by the regulator. As the representatives of ASIC has reported, these decisions have been made to make sure that the regulatory body is able to ensure the maximum safety of investors on the market.

The new restrictions that were adopted by ASIC and other regulatory bodies around the world indicate how much influence European regulations have around the world. For many years, European regulatory bodies were the ones that would influence the changes around the world the most, and the current situation once again proves that European regulatory bodies have a huge effect on the changes that are happening around the world.

In Australia, these new changes will affect the local market very much. There are many brokers in the country who are based in Australia and offer services in the country. Australian FX brokers have a huge effect on the whole region, and the influence that it has is increasing a lot on daily basis.

The Australian Securities and Investment Commission, ASIC, is a very important body for Australia. It registers companies in the country, takes care of the financial markets, and provides financial services and credit services throughout the country. These recent changes in the guidelines of the ASIC will have a huge effect on the experience in the local market of the country.

By Nika Gamtsemlidze

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